Profiling Sony’s accumulated losses across categories

Sony’s loss in key categories such as Music and Televisions is the key to a accelerated downward spiral. The second part of the three series (Read part 1 here) blog examines the losses by the electronics giant across its key categories.

Music
With its catalog of music and foundation in electronics, Sony had the tools to create a version of the iPod long before Apple introduced it in 2001. The Sony co-founder, Akio Morita, envisioned as early as the 1980s marrying digital technology with media content for a completely new user experience. It didn’t happen. Initially, Sony engineers resisted the power of the company’s media divisions. Then Sony wrestled with how to build devices that let consumers download and copy music without undermining music sales or agreements with its artists. The company went its own way: its early digital music players, for instance, used proprietary files and were incompatible with the fast-growing MP3 format.

Television
Sony held aces in Televisions till about middle of last decade with impressive technologies such as Trinitron. However, lower-cost manufacturers from South Korea, China and elsewhere, are increasingly undercutting Sony. As TV’s shifted to larger and typically thinner formats, Samsung truly leveraged its expertise in thin panel screens to dislodge Sony and take the top mantle in Televisions. As Sony’s brand started losing much of its luster, the company found that it had a harder time charging a premium for its products.

The conundrum of many
Sony still makes a confusing catalog of gadgets that overlap or even cannibalize one another. It has also continued to let its product lines mushroom: 10 different consumer-level camcorders and almost 30 different TVs, for instance, crowd and confuse consumers. The diffused attention on multiple product lines has led to a divergence in focus (in sharp contrast to Apple’s focused strategy)

Gaming
An area where Sony has found success — and perhaps one that most crystallizes the transition from stand-alone consumer electronics into a digital, Internet-centered world — is video games. Sony marketed its PlayStation 3 console, for example as an integrated entertainment system that serves as a hub in the living room, connecting the Internet and television. But Sony’s obsession with hardware has marred that strategy. A delay in developing the console’s Blu-ray DVD player forced Sony to push back its release. Sales suffered because the PlayStation 3 cost much more than rival models from Nintendo and Microsoft. Sony was also slow to move into the world of online games, giving Microsoft a head start.

Online
Sony’s online strategy is problematic as well. The company has yet to come up with an integrated common platform to deliver music, movies and games, each of which, until recently, had its own network, with other platforms like the PlayMemories photo- and video-sharing services to boot. Now, these disjointed services, developed by far-flung units, are being forced into the Sony Entertainment Network, which Sony says will be its overarching content delivery platform. Experts say it will have to start exiting some product lines. It has already spun off a chemicals business, for instance, and some analysts wonder about its money-losing TV business.

to be continued

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Nintendo DS and Sony PSP loosing relevance and life on Portable Gaming!

Digital content distribution has disrupted several notable industries. In that context, no industry has been more impacted by digital distribution than the video games. Leading the disruption are iOS and Android devices, whose free and inexpensive games, distributed across a massive installed base of powerful and networked tablet and mobile phone form factors, have already disrupted billions of dollars of game revenue.

Portable gaming, has been dominated by Nintendo and Sony for over two decades. In this model, at retail, consumers pay around $200 for the gaming device and up to $40 for popular game cartridges. Because of the similar form factor, overlap in consumer base (especially younger players on iPod touch) and the casual nature of game content, iOS and Android devices have redefined the category. With the inclusion of smartphone revenue into the category, shifts taking place in market share become clearer.

The most striking trend is that iOS and Android games have tripled their market share from roughly 20% in 2009 to nearly 60% in just two years. Simultaneously, Nintendo, the once dominant player, has been crushed down to owning about one-third of market in 2011, from having controlled more than two-thirds in 2009. Combined, iOS and Android game revenue delivered $500 million, $800 million and $1.9 billion over 2009, 2010 and 2011, respectively.

Within the portable category, an abundance of digitally distributed free and $0.99 games, available on hardware that is both comparably priced and more powerful than traditional portable game devices, better appeals to many consumers. As a result, the days of paying $25, or more, for a cartridge at a retail store may soon end. Further, the installed base of iOS and Android devices has not only reached critical mass, but also continues to grow at unprecedented rates. In their latest public statements regarding installed base, Apple and Google reported a total of 250 million iOS devices and 190 million Android devices activated, respectively.

Due in part to its demise in the portable game category, Nintendo is facing its first fiscal year loss since the company began reporting profits in 1981. Combined with slumping Wii sales, Nintendo is indeed struggling. Equally concerning for Nintendo is that the battle for video game dominance is entering the living room, with entries by both Apple and Google into the TV category. Ostensibly, this new class of hardware will create a new platform upon which the digital distribution model of apps will be overlaid. Now, in addition to tablet form-factor competition, the console game industry, which currently pits Microsoft, Sony and Nintendo against each other, will additionally face competition from Apple and Google TV initiatives. Beyond 2011, if Nintendo continues to face financial hardship, it may be forced to consider difficult choices such as divesting its hardware business and distributing its content, for the first time, across non-proprietary platforms.

In February this year, Nokia’s CEO Stephen Elop mentioned about the burning platform in a internal memo to Nokia employees. Nintendo has a very similar problem at hand. A burning platform and hard decisions for its future – Innovate or Die!

Google+ ventures into online gaming. Facebook and Apple to feel the heat

One of my oft reservations about G+ and after its initial success has been the lack of games. Games have been have been huge sticking pads for Social networking sites such as Facebook. It increases the user time spent on the site and gives that much bigger a window for more ads to be served to the consumers.

With respect to that, Google+’s move into gaming should be a scare to both Facebook and Apple, the two leading next generation gaming platforms. Not with-standing the early success of Google+ and the fact that Google+ could use Google’s portfolio of internet based applications and services over the Gaming domain for more relevant and pertinent targeting, there are other factors that make Google+’s venture into gaming a point of discontinuity

1.Google is attempting to break today’s 30 percent cut that has become standard across both Facebook and Apple. Google will share 95 percent of the revenue from virtual goods sold with the developers and keep only five percent for itself.

2.Google is also interested in allowing games to be played cross-platform, meaning a person could pause their game on the Web and then pick back up in the same place on their phone. If Google+ games could run through the browser on the iPhone or iPad, it could undercut Apple on its own device.In that scenario, consumers would have to find a compelling reason to switch from playing games that are downloaded through the App Store to playing games through a Google+ experience.

3. Google’s partnership with Adobe will be a critical experience factor for users on Google versus Apple. Add to that a HTML5 integration in the horizon, Apple also has a reason to be wary of Google’s moves in online gaming.

Regardless, it should be comforting to developers who are uneasy with the control that either Apple or Facebook has from time to time. Developers will be looking to see if the Google+ game network can be as powerful as Facebook. One thing for certain is that they all can start off with a fresh slate. Not one is massively bigger than the others, like Zynga, which is larger than the next 15 developers combined.

The full list of games now on Google+ includes Angry Birds, Bejeweled Blitz, Bubble Island, City of Wonder, Collapse! Blast, Crime City, Diamond Dash, Dragon Age Legends, Dragons of Atlantis, Edgeworld, Flood-It!, Monster World, Sudoku, Wild Ones, Zombie Lane and Zynga Poker.

Freemium Gaming Business Models: Here for Good!

Gaming takes the cake in terms of Apps and its stickiness with users.Average mobile gamer plays approx 7.8 hours per month where-as an iPhone user plays the most at 14.7 hours per month & Android users play 9.3 hours p.m. This data was released by Nielsen for Q2,2011.

An interesting survey of top 100 grossing games on the Apple Apps store in January and June of 2011 by Flurry yields an interesting trend in terms of gaming. Games occupy more than 75% of all top 100 grossing apps in the app store, it’s the single most dominating business model in the mobile apps industry today. The interesting result of this survey is the growth of revenue from Freemium games at the cost of share decline of Premium-paid up games.

Stickiness is the key to success of all gaming because this then provides compelling spending opportunities and branding spaces for consumers as well as sponsors. The best example is that of Zynga which with its Farmville and Cityville franchises has worked its way to a $1bn IPO.

A freemium model with in-app purchases, is perceived to be advantageous as it can induce higher trial and usage rates. Also, when a network of friends opts in to play together, their group profiles and consumption can be an interesting hunting ground for brand ads and sponsors. Those who consider buying or paying money on the gaming app will anyways be doing it if the game appeals to them. Thus in terms of appealing to larger initial masses, a freemium app definitely beats out a premium app. The other problem with a premium app is that without any trials on the game, it is a difficult choice to invest on the game upfront to the users.

Freemium and Free-to-play is here for good.

Elaborating the 3G Services

I get the feeling sometimes that 3G is more of a global buzzword amongst people around with only a shallow understanding of the services it enables. Sure, everyone is aware of the High Speed Data Access on mobile devices, but what does it do beyond that? Here are a few thoughts on services and features that 3G enables/would enable in times to come:

1. Large “Enterprise” Apps: The SAP and Oracle ERP systems run on broadband and even then are notoriously heavy on system resources and usage. 3G with its enhanced data bandwidth and higher speeds of data would be a huge enabler in terms of running these large “enterprise” applications on the mobile “on the go”. Enterprise adoption for running business and systems would thus be the biggest contributor for 3G revenues.
2. Video Streaming: This will be the most “visible” benefit of the high data speeds in 3G across a diverse set of usages
a. Video Conferencing: We have seen this (remember the Deepika Padukone BSNL ad)
b. Video Streaming/Mobile TV: TV content on the move through air on the mobile
c. Social Networking: While access to Facebook and other SNS sites is possible on 2G, video sharing is yet to catch on. Videos On Facebook and YouTube consumption will see a big fillip thanks to the data speeds of 3G
d. Mobile Surveillance: An application which has both enterprise and domestic use, video feeds of users house or work place will be enabled by 3G

3. Live Gaming: Rich media transferred through over the Internet providing a console like Gaming experience would be another domain that would benefit from high data speeds

4. Cloud Streaming: Music, Video Clippings, or Streaming Games are possibly the first phase of Cloud based services. Going beyond, the focus would shift to the Cloud wholly. The kind of stuff being spoken of here is Part OS in the cloud, Remote Software, Remote Applications. The user device would simply have to log into the cloud and choose the end service and the enablers will dynamically support the end service. Thus a lot of storage on the device (such as mobile phones), will shift to the cloud which will come into service only when required by the user. The high data speeds will support the dynamic transfer of data and services through the air.

5. Location Based Services: While most Location Based services will normally be supported on 2G networks, there may be high end applications such as LAYAR which will require speedy and dynamic link up with the central servers to feed location data to the consumers

6. m-Commerce, m-Health, m-Payments and m-Banking: All and most of these are supported by 2G services, but enhanced data and security layers for payments, banking and commerce could be facilitated by 3G. Similarly Remote Health monitoring (in absence of broadband connectivity) can be another major service enabled by 3G (remember the Deepika Padukone BSNL ad again)

Social Gaming: Big Business on Mobiles

With the advent of 3G services, Social Gaming is at its “point of inflection”.

Game developers in India are looking at mobile phones as a new platform to launch new games as successful 3G bidding and arrival of smartphones are beginning to give social gaming a much needed fillip. The other factor that enhances social gaming as a market has been the reducing cost of ownership of smartphones. Demographically, 70% of the social gamers are Males and most of them in the 15-24 years bracket.

The social gaming market worldwide is estimated at $60 million, of which the mobile gaming market is registering a 45% CAGR. Globally, Gaming is expected to become a billion dollar industry by 2012. In India the social gaming industry is still in nascent stages but is expected to multiply 6 times in the next 3 years to Rs.1,500 crore which would contribute nearly 13% of the overall mobile VAS market in the country. Currently, the mobile gaming market is 3% of the mobile VAS market in the country. This growth will be possible as 3G rollout will push the current 5 crore social gaming active users by 300% to 20 crore active gamers.

The big names in the business are all launching their Mobile social networking gaming platforms:
1.ibibo.com is planning to make all its games available on the mobile network
2.Aircel and Airtel are pushing social and mobile gaming as means to drive their GPRS/online traffic
3.Gaming is one of the big categories in the Ovi mobile store
4.ADAG has also launched Jumpgames to tap into mobile social gaming network
5.Indiatimes launched a mobile game based on the movie I hate love stories
6.Zapak is also in talks with mobile operators for specific mobile gaming
7.Contents2win has launched a Mahabharata based soccer game.

XBox Kinect: Real Time Motion Gaming Dawns (Part II)

Here’s how this genie works (courtesy Paul Miller):

“Kinect combines a few detection mechanisms to build up a rather accurate and comprehensive amount of 3D data on what’s going on inside a room. There’s a color camera for taking pictures, recognizing faces, and so forth, but the real magic happens with the monochrome CMOS camera sensor that’s paired up with an IR blaster. Microsoft calls this its “depth sensor,” and the light and shadow of that image (lit by the human eye-invisible IR spectrum) is analyzed to build a 3D map of the objects within Kinect’s field of view. Finally, there’s a multi-array microphone setup to detect location of voices and to cancel out ambient noise, allowing for video chats without a headset. All of this sits atop a motorized tilting base of sorts, which when used in conjunction with skeletal and facial tracking, Kinect can pan and tilt to keep its sensors trained on you as you move around the room. One down side of the motorized base, however, along with the rest of the fairly complicated electronics, is that the Kinect hardware isn’t tiny: it’s about a hand’s width tall, about as deep, and around a foot wide. When you think about it, the entire Wii occupies less cubic real estate. It shouldn’t have much trouble squeezing in up in front of your LCD TV, but good luck trying to balance it on top, and we have no idea how folks who hang their TVs on the wall should approach this situation.

One thing that Microsoft has actually left out of Kinect is a dedicated processor. The original plan was purportedly to have the Kinect pull its own load, allowing the Xbox 360’s processors to run free in rendering games. In the interest of cost, however, the processor got cut and now the Xbox is taking a 10-15% processor hit. Reports are conflicting as to whether or not that’s going to impact the sort of games that make it onto the system, but either way it pretty much rules out retrofitting older games for a new Kinect control scheme.

There are divergent reports on lag, but 100-150ms seems to be around where Kinect is playing (Sony claims a 22ms lag for PlayStation Move). During that time the system is tracking and processing 48 skeleton points in 3D space, watching up to two people, and repeating the process at around 30 fps.”

Kinect will be bundled along with the Xbox 360 and while the Xbox 360 has a tag of $199, the Kinect bundles will cost $399 for elite and $299 for arcade.

Microsoft has wowed the journos and analysts alike with the experience of real games, real gameplay, and real hardware, and a very real desire to get hands on with this new technology. The wait is set and we have a date with the Kinect, this 4th November 2010.

XBox Kinect: Real Time Motion Gaming Dawns (Part I)

Microsoft Project Natal finally sees the light of the day November 4th 2010 and it has a new name: Kinect. This is a part of the overall Microsoft strategy to use Natural motions as user interfaces.

The strange alien shaped machine which will be bundled along with the New Xbox 360 has not been named yet. The device specializes in Motion Gaming (which is what Natal was all about) with a dual/multi player capability, three dimensional approximation, Voice control mechanism, Social networking Apps: Twitter, Facebook, Zune and Netflix and a Video Chat App. Click here for more details of the games, device and user experience.

The interface is kept simple: You wave your hand to control a glowing cursor of sorts, and you push forward to “click” on the element you want.

Quoting Paul Miller on the Kinect Lite:
“In some ways, it’s pretty charming, with fun, jazzed up icons (when you hover over them they tilt and show off depth), a simplistic layout, and some great voice controls. The downside is this all comes at the cost of a brand new, fairly redundant interface for accessing functions that are already available with your Xbox 360 controller in the regular Dashboard. Still, there’s no denying the joy of waving a hand to log in, hovering over icons to select channels (though the wait-to-click mechanism strikes us as eventually frustrating), and scrubbing through media with very intuitive gestures.”

Cloud Gaming: When Gaming meets the cloud

Content Streaming, Music Streaming and if the trend at E3 is to be believed, the world is now headed to Game Streaming. We would call it “Cloud Gaming”

The Gigahertz Microprocessors and the iPads of the world along with Cloud computing could be unveiling the age of “cloud gaming”. Several companies hope using cloud computing to store games will be the real shift by letting gamers play high-end titles anywhere, on almost any machine. A view to “cloud gaming” is that If fully realized, they say, cloud gaming could be a console killer. The need and the idea is to make video game content increasingly free from the restrictions of device and location, while showcasing the ability to instantly play the latest, most advanced games at the touch of a button. Cloud gaming uses rapid data compression to let users store their games “in the cloud” — on Web servers — and then pull them down and play them using a regular Web browser. It’s the same concept as storing photos on a site such as Flickr or music videos on a MySpace page. The user doesn’t actually have those files on any one particular computer but can access them from anywhere. The only thing the user needs is a capable device, a decent browser and an a fast internet connection. The iPAD seems to be a good answer in terms of a capable device.

The Assasins Creed II finds a new home in the cloud

There are a few companies which are making early inroads into the area of “cloud gaming” and some interesting game titles such as Assassins Creed II, “Batman Arkhalam Asylum” and “Mass Effect II” have found new homes in the crowd and more are to follow. Revenues are to be made from subscription services, or pay per play or even in terms of trail gaming before buying the real monty from a store. Microsoft with its Xbox Live network, Sony with its Play Stationplus, Virgin, aggregators like Onlive and Gaikal are early entrants into this new gaming construct.

Batman: Arkhalam Asylum is another blockbuster to go to the cloud

However, not everyone in the tech community is sold just yet on the concept of “cloud gaming”. Some question whether gamers, who presumably already have at least one gaming console, will pony up again for the ability to play their favorite titles from the cloud.Even if it costs less to rent or play a game — and it probably will … Game streaming will have a tough time competing with actual hardware for all but the most dedicated gamers.

Interesting piece and we would be keeping an eye on that.

Gartner: A study in Mobile Gaming

Mobile gaming is Big… If the reports from the Apps store reports have to be believed. Gaming is one of the top 3 most downloaded applications from Apps stores: Be it Apple, Google, Ovi or the many others. Gartner estimates 70 percent to 80 percent of all mobile consumer applications downloaded are mobile games.

The mobile gaming industry grew by 19% YOY 2009-10 versus 2008-09 and Gartner redicts the growth to remain intact at 15% CAGR for the next half a decade. The mobile gaming market is expected to reach $11.4 dollars by end of 2014. While a majority of Apps downloads are games, 60 to 70% of downloads are “free”. This trend doesnot look like its going to change at least in the next 2-3 years.

According to Gartner , the factors that will be boosting the global popularity of mobile gaming include the following:
1.The increasing accessibility of mobile games in emerging markets, where alternative gaming media are limited.
2.Growing availability of micropayments for mobile gamers attracts users previously wary of investing larger amounts of money upfront to try out a game and also attracts groups whose disposable income is limited
3.Even with the popularity of the Apps stores,Gartner doesnot expect the ad-supported model to take off within the next three years – despite the success seen with this approach in the Japanese market
4.Improved user interfaces are a top priority for handset vendors as a competitive differentiator. A growing number of devices are implementing touchscreens and gesture, and enhanced qwerty keyboards will also improve the end-user experience.
5.An increasing number of games are taking advantage of existing device features, such as camera, GPS and accelerometers, to enhance game play.
6.Direct billing is one of the most significant value-adds that Content Service Providers can provide their partners – allowing consumers to charge purchases directly to their wireless bills.
7. Improvements to boost access to mobile games via search and recommendation engines are also improving take rates for mobile gaming, while more-competitive data pricing will lower barriers to adoption.
8.As more devices become connected, consumer electronic devices, such as tablets and portable gaming consoles, will join this space, adding another aspect to the market